Abstract
This paper analyzes the stability of stablecoins and proposes a framework to test for absolute and relative stability of stablecoins. Based on high-frequency data, we find strong evidence of excess price variations. While Bitcoin is a likely source of this excess volatility because stablecoin returns, volatility and volumes are highly correlated with corresponding Bitcoin time-series, we also demonstrate through a quasi-natural experiment that stablecoins increase the trading volume of Bitcoin. The findings suggest stablecoins play a key role in cryptocurrency markets.
Original language | English |
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Pages (from-to) | 1984-2000 |
Number of pages | 17 |
Journal | European Journal of Finance |
Volume | 30 |
Issue number | 16 |
Early online date | 8 Jul 2021 |
DOIs | |
Publication status | Published - 2024 |